World Bank to provide $1 billion loan for Dasu hydropower project as costs surge

The World Bank has agreed to extend a new $1 billion loan for the first phase of the Dasu hydropower project, pending approval of its revised Project Concept-1 (PC-1), which now reflects a significant cost escalation. 

The project’s estimated cost has surged by 190% from Rs586 billion to Rs1,700 billion, largely due to prolonged land acquisition, security challenges, and a sharp depreciation of the Pakistani rupee against the US dollar.

Dasu, a run-of-river project located on the Indus River in Upper Kohistan, Khyber Pakhtunkhwa, is being developed in two stages. Stage-I is expected to generate 2,160 megawatts (MW) through six units of 360 MW each, while the completion of Stage-II will raise total capacity to 4,320 MW. 

The project will eventually produce 21,445 gigawatt-hours (GWh) annually, with Stage-I contributing 12,222 GWh.

The World Bank had previously provided $588 million for the project and offered guarantees to secure $460 million from international lenders. 

Under the new financing structure, $800 million of the $1 billion loan will come from the International Development Association (IDA), while $200 million will be extended through the International Bank for Reconstruction and Development (IBRD). 

Of the IDA portion, $435 million will be issued at zero interest, while the remaining $365 million and the IBRD loan will carry interest rates of 5.83% and 6.13%, respectively.

The Ministry of Water Resources has finalized the revised PC-1 and is set to submit it to the Planning Commission for approval in the coming days. Once cleared, the Water and Power Development Authority (WAPDA) and the World Bank will formally sign the financing agreement.

Originally slated for completion by 2023-24, the first phase of the project is now expected to be operational by 2027-28. The delay in land acquisition, which was supposed to be completed by 2014 but extended to 2021-22, significantly impacted project timelines and costs. 

Additionally, the depreciation of the Pakistani rupee—falling from Rs100 per US dollar to Rs278—has further inflated expenses.

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